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Cyient DLM Ltd

| Q3 FY26 Conference Call Transcript

BULLISH SENTIMENT

Report Source

⬤24th Dec 25

Summary : Cyient Semiconductors acquired Kinetic Technologies to accelerate its IP-led power management strategy, aiming for leadership in India's semiconductor product market with significant growth prospects.

Management Perspective positive : I am very excited to share some transformative developments that position Cyient Semiconductors as a leader. We have made tremendous progress in this journey. This acquisition thus plays a critical role in further strengthening and accelerating our IP-led play.

Concall Report Analysis & Insights

Business Overview

  1. Cyient Semiconductors aims to be India's first and largest fabless semiconductor company.
  2. The company focuses on high-end services, custom ASIC, and proprietary custom chips.
  3. Acquired majority stake in Kinetic Technologies to accelerate product strategy and IP-led play.
  4. Kinetic acquisition doubles addressable market to $8.5 billion, adding 250 ASSP products and 100+ patents.
  5. The acquisition is expected to be EBIT accretive from year one (FY27) and EPS accretive from year two.

Future Growth Prospects

  1. Targeting high-growth markets like AI data centers, Edge AI, industrial automation, and electrification.
  2. Kinetic acquisition accelerates power strategy and expands market opportunity by years.
  3. Expects 15%-20% consistent year-over-year revenue growth from the semiconductor business.
  4. ASSP business (custom products) is projected to reach 50%-55% of revenue by FY27.
  5. Aims to become a world's leading fabless semiconductor house, especially from India.

Management Insights

  1. Significant progress made in nine months towards becoming a leader in India's semiconductor ecosystem.
  2. Kinetic Technologies acquisition is transformational, strengthening IP-led play and financial profile.
  3. Strategic partnerships (GlobalFoundries, Navitas, etc.) are crucial for wafer pricing and ecosystem building.
  4. The three-pillar strategy (services, custom ASIC, ASSP) drives long-term growth and value creation.
  5. Focus on power management as a key differentiator across all segments.

Signs of Skepticism

  1. Kinetic's past revenue declined due to pivoting from consumer and divesting non-core business.
  2. The 3.5x price-to-sales multiple for Kinetic was questioned by an analyst.
  3. Cyient currently holds 65%-70% stake in Kinetic, with full control anticipated in a four-year horizon.

Good To Know

  1. Cyient Semiconductors was carved out nine months ago.
  2. Won a contract with Semiconductor Complex of India Limited for a 180-nanometer process upgrade.
  3. Partnered with Azimuth to design India's next-gen smart meter chip.
  4. Global AI electricity demand is projected to reach 21% by 2030, highlighting need for power-efficient chips.
  5. Kinetic Technologies has over 20 years of industry experience and deep customer relationships.

Key Drivers

  1. Kinetic acquisition accelerates product strategy.
  2. Doubles addressable market to $8.5 billion.
  3. Adds 250 ASSP products, 100+ patents.
  4. Positions Cyient as India's first product company.

Key Analyst Discussions

Competitive Environment

  1. Tessolve is a peer in services business.
  2. EnSilica and ICsense are competitors in turnkey ASIC business.
  3. MPS is considered a peer group for the high-growth power ASSP business.

Market Trends & Consumer Behavior

  1. AI proliferation drives demand for efficient power consumption in data centers.
  2. Custom chip demand is growing three times faster than standard products.
  3. Power semiconductors are the largest analog and mixed-signal market, disrupted by AI.

Financial Highlights

  1. Kinetic's current revenue is estimated at $40 million for this year.
  2. The acquisition multiple is around 3x revenue, considered competitive against 5x-6x median.
  3. EBIT will be positive next year, excluding intangible amortization from acquisition.
  4. Gross margins in semiconductor business can reach 45%-50% with good wafer pricing.
  5. Overall combined entity aims for flat EBIT for organic business by end of next year.

Product Composition

  1. Current revenue mix: ASIC turnkey is ~35%, services is the rest, ASSP is zero.
  2. Medium-term goal: ASIC turnkey above 50% of revenue mix.
  3. Long-term goal: ASSP to take lead in revenue mix.
  4. By FY27, ASSP business (with Kinetic) is projected to be 50%-55% of total revenue.
  5. Remaining mix by FY27: 30%-35% from turnkey ASIC, ~15% from services.

Strategic Considerations

  1. Management intends to rapidly scale the semiconductor business.
  2. Initial focus is on integrating Kinetic before large strategic acquisitions.
  3. Tactical acquisitions for specific IP or product portfolios are possible.
  4. Full ownership of Kinetic is anticipated within a four-year horizon.